EARLY TEST FOR GOV. BROWN’S PENSION REFORM

The single most important part of the pension reform measure that Gov. Jerry Brown got the Legislature to adopt in September was its requirement that government agencies in California adopt pension policies in which employers and employees split the “normal cost” of pension obligations each year going forward. This is likely to make many public employees want cheaper retirement benefits, choosing more take-home pay over the prospect of a larger pension.

But will this actually be enforced? Thanks to a resolution passed by the Legislature in August, we will see an early test. It gives the California State Teachers’ Retirement System a Feb. 15 deadline to provide the Legislature with three options to address CalSTRS’ huge unfunded pension liability. (The Legislature sets pension contribution rates for CalSTRS, unlike with other state pension systems.)

Given the power of teachers unions in Sacramento, there seems likely to be a concerted effort to get around the pension law’s requirement that costs be split equally. Otherwise, teachers will face a de facto pay cut. According to Calpensions.com’s Ed Mendel, unions may launch a court fight arguing that the 8 percent of pay that current teachers now contribute to pension costs is a vested right and cannot be changed – even though that is far less than the half of “normal cost” pension obligations that employees are supposed to cover.

Will the Legislature simply agree with this interpretation rather than irritate a powerful special interest? We shall see. But we hope the governor is ready for a fight.